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Bank Reconciliation

Tanner Companys April 1, 2010 pre-reconciliation cash balance on their books was $35,000. While preparing the April 1 bank reconciliation, Tanner determined that outstanding checks total $11,000, deposits in transit total $7,000 and bank service charges are $50. How much was Tanners April 1, 2010 cash balance per bank statement? Book balance Less: Service Fee Deposits in-transit Plus: Outstanding Checks Bank Balance 35,000 (50) (7,000) 11,000 38,950

Sideline Company reported net income for 2013 of $70,000 and in 2014 of $84,000 (both after income taxes at a 30% rate). It was discovered in 2014 that the ending inventory for 2013 was understated by $2,000 (before any income tax effect). Calculate the correct net income (after income tax of 30%) for 2013 and 2014 2014
Beginning inventory*

2013 Correct

U $2,000

Cost of goods available Ending inventory*

U $2,000
Correct U $2,000

Correct
U $2,000 O $2,000 U $2,000 U $2,000 U $600 (= 2,000 x .3) U $1,400
2013: 70,000 + 1,400 UNDERSTATEMENT = 71,400

Cost of goods sold


Gross margin Income before income taxes Income tax expense Net income

O $2,000
O $2,000
O $600 (2,000 X .3)

O $1,400

2014: 84,000 1,400 OVERSTATEMENT = 82,600

LIFO RESERVE:
QV-TV, Inc. provided the following items in their footnotes for the year-end 2010: Cost of goods sold was $22 billion under FIFO costing and their inventory value under FIFO costing was $2.1 billion. The LIFO Reserve for year-end 2009 was a $0.6 billion credit balance and at year-end 2010 it had increased to a credit balance of $0.8 billion. How much is LIFO inventory value at year-end 2010? How much is 2010 COGS expense under LIFO?

LIFO Reserve
FIFO
Beginning Inventory

LIFO

LIFO Reserve
.6 billion
LIFO Reserve increased by .2 which = difference in COGS Expense

Ending Inventory

2.1 billion 22 billion

?
$2.1 - .8 = 1.3

.8 billion

COGS Expense

?
$22 + .2=22.2

LIFO inventory ($1.3 billion) = FIFO inventory ($2.1 billion) - LIFO reserve ($0.8 billion) LIFO COGS 22.2 billion = FIFO COGS ($22 billion) + change in LIFO reserve ($0.2 billion)

Sample A/R and Bad Debt Expense Problem:


Burnap Company has performed the following year-end analysis of its accounts receivable:
Total 1-30 Days $72,000 $45,000 31-60 Days $14,000 61-90 Days $8,000 Over 90 days $5,000

The company had sales of $850,000 of which 20% were cash sales. As of year-end, the balance in Allowance for Uncollectible Accounts before adjusting for bad debts was a $400 credit. Burnap Company has estimated the following bad debts percentages:
1-30 days 31-60 days 61-90 days Over 90 days Total Credit Sales 6% 15% 40% 75% 1.5%

1. Provide the journal entry for bad debt expense using Aging of A/R method and provide the A/R presentation on the B/S 2. Provide the journal entry for bad debt expense using Percentage of Credit Sales method and provide the A/R presentation on the B/S

Total 72,000 X % bad debt 11,750

1-30 days 45,000 .06 2,700

31-60 days 14,000 .15 2,100

61-90 days 8,000 .40 3,200

Over 90 days 5,000 .75 3,750


Allowance for Uncollectible

$11,750 is the amount of A/R


you estimate is at risk; this is your desired Ending Balance in the Allowance account

Accounts Receivable 72,000

400 Beg Bal 11,350 11,750 End Bal Income Statement

Bad Debt Expense 11,350 Allowance for Uncollectible Accts 11,350 To reserve for uncollectible accounts
Balance Sheet Presentation: Accounts Receivable 72,000 Less Allowance (11,750) Net A/R 60,250

Balance Sheet

Bad Debt Expense using Percentage of Sales method: Credit Sales: 680,000 (850,000 total sales * .80 credit portion) X % of bad debt: x .015 Bad Debt Expense 10,200
You will record bad debt expense as calculated, disregarding the existing balance in the Allowance account:

Accounts Receivable

Allowance for Uncollectible

72,000

400 Beg Bal 10,200 10,600 End Bal

Income Statement Bad Debt Expense 10,200 Allowance for Uncollectible Accts 10,200 To reserve for uncollectible accounts

Accounts Receivable Less Allowance Net A/R

72,000 (10,600) 61,400

Balance Sheet

Hewitt Company had sales during February 20X5 of $29,000. During the month, the company had purchases of $17,000. At February 1, 20X5, the company had inventory of $4,500. Assuming the company has a gross profit percentage of 40%, what is the estimated ending inventory for Hewitt Company at February 28, 20X5?

Sales Cost of goods sold equation: Begin Inventory, Feb 1 +Purchases =Cost of goods available for sale -End Inventory, Feb 28 (Plug) =Cost of goods sold, 60% of $29,000 Gross Profit Percentage, 40% of $29,000

$29,000 $4,500 $17,000 $21,500 x? = 4,100 17,400

$ 11,600

Warranty Liability
At the beginning of 20X4, Computers R Us had a liability for warranties of $17,500 on the books. During 20X4, Computers R Us had sales of $205,000. The company estimates that the cost of servicing products under warranty will average 2.5% of sales. Expenditures (all in cash) to satisfy warranty claims during 20X4 were $4,800, of which $2,500 was for products sold in 20X4. Compute the December 31, 20X4, ending balance in the Liability for Warranties account.

Beginning balance Additions for 20X4 sales Reductions for services provided

$17,500 5,125 (4,800) $17,825

Given the following data, what is cost of goods sold as determined under the LIFO vs. FIFO method :

Sales Beginning inventory Purchases

350 units at $35 per unit 140 units at $15 per unit 400 units at $20 per unit

COGS using LIFO methodology: prices assigned are most recent purchases 350 units sold * $20 = 7,000 COGS using FIFO methodology: prices assigned are oldest purchases (140 units sold * $15 = 2,100) + (210 units * $20= 4,200) = 6,300